Regulator releases details on director disqualifications

Steps city
By Andrew Harbison, CA Today

17 May 2016

The average disqualification period imposed on directors by the Insolvency Service has increased, according to figures released by the regulator.

The average period of a director’s disqualification was 5.9 years, a 0.3-year increase compared to 2014/2015.

The number of disqualifications remained at a relatively similar level to those of last year, with 1,208 director disqualifications obtained as a result of the efforts of the Insolvency Service, down by two on last year’s figures.

A breakdown of these numbers shows that between January to March 2016, a total of 390 disqualifications were obtained, a 56% increase on the same period in 2015, and the largest number of disqualifications in any quarter for more than five years.

However, it is not uncommon to see a spike in disqualifications in any one quarter, the Insolvency Service said.

As the processes of investigation into a director is often a lengthy one (around 24 months between insolvency and disqualification order), a peak in disqualifications would be expected to occur around two years after a peak in company insolvencies.

Enforcement Outcomes

Source: The Insolvency Service

The majority of disqualifications were made in relation to unfit conduct in relation to an insolvent company. These made up for 96% of all disqualifications, consistent with the longer term trend of around 95%.

The most common allegation made in director disqualifications obtained in 2015/16 was in relation to the unfair treatment of the Crown (which usually refers to HM Revenue and Customs (HMRC)).

Unfair treatment of the Crown can range from cases where a director had made a conscious decision to pay other creditors and not HMRC, to cases where a director has defrauded or attempted to defraud HMRC. This has been the most common allegation made since comparable quarterly records began in 2011.

Enforcement Outcomes Bankruptcy

Source: The Insolvency Service

47 directors were disqualified during 2015/2016 for a total of 290 years for employing illegal workers. Other significant director disqualifications included the director of an investment company, who was disqualified for 14 years in March for mis-selling half a million pounds of worthless rare earth metals as investments to members of the public.

The number of companies wound up in the public interest increased this year by 27% to 131. The compulsory winding up of a company is a legal process where the company is placed into compulsory liquidation by order of the Court. In one case this action was taken as a result of a company making false and misleading claims in persuading the elderly and vulnerable to purchase grossly overpriced and unnecessary health supplements.

Bankruptcy and debt relief restriction orders, which only relate to individuals in England and Wales, decreased by 25%, continuing the downward year to year trend which reflects an overall decline in personal bankruptcy in recent years.


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